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UPS Posts Lower Profit, Revenue

A United Parcel Service Inc. logo on the door of a truck parked at a customer service facility in San Francisco, Calif., last year.
Bloomberg

By

Bob Sechler

Updated Oct. 23, 2012 11:57 a.m. ET

United Parcel Service Inc.
UPS -2.21%
reported a drop in third-quarter earnings despite a rise in package volume, as soft international trade and a growing preponderance of low-priced shipments from online shopping damped results.

The Atlanta-based delivery company also booked a big pension-restructuring charge in the quarter.

E-commerce has been something of a mixed bag for top shippers such as UPS and
FedEx Corp.
FDX -0.96%
, buoying volumes but at low prices. UPS said Tuesday that in the latest quarter revenue per package slipped 0.8% in the U.S. despite the overall volume increase.

Internationally, volume was off 1.2% in "an environment of slowing global trade," the company said. Still, it noted that international export volume—defined as packages that cross borders—was up 1.2%, helped by growth out of Asia for the first time in several quarters.

UPS and Memphis, Tenn.-based FedEx have been wrestling with soft demand for Asian exports in both the U.S. and Europe, and have trimmed airfreight capacity out of the region.

UPS executives called their latest Asian trends positive but stopped short of calling it a rebound. They said Asian export volume was up about 2%, reflecting recent electronics product launches and weakness in the third quarter last year.

Overall, they said the business environment was "for the most part consistent" with their expectations, and they narrowed the high and low ends of their full-year profit forecast by five cents, now projecting $4.55 to $4.65 a share.

UPS and other big transport companies are viewed as economic bellwethers because they transport everything from financial documents and pharmaceuticals to auto parts and electronic devices.

More on UPS and TNT

UPS reported a third-quarter profit of $469 million, or 48 cents a share, down 56% from $1.07 billion, or $1.09 a share, a year earlier. Excluding items such as costs to restructure it pension plans and a U.S. domestic package withdrawal liability charge, adjusted per-share earnings were $1.06 in the most-recent quarter. Revenue fell 0.7% to $13.07 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of $1.06 a share on revenue of $13.31 billion.

Operating margin fell to 5.9% from 12.7%.

UPS agreed in March to acquire Dutch rival TNT Express NV for roughly €5.16 billion, or about $6.7 billion, in an effort to expand its market position in Europe. But European competition authorities formally objected to the merger last week, primarily because it would reduce the number of companies running pan-European parcel-transport networks to three from four.

UPS Chief Executive
Scott Davis
said Tuesday that the company still expects to close the acquisition "early next year," characterizing the objections by the European Commission as relatively standard in such deals. He said UPS will respond to the objections within the designated two-week time frame.

"This is not uncommon," Mr. Davis said. "We're confident we'll get clearance, and we'll get it early in 2013. We're committed to the transaction."

In March, UPS and TNT said they expected the deal to close in the third quarter but subsequently pushed the date back several times because of the prolonged regulatory review.